Key Takeaways

● Majors moved higher, buoyed by last week’s lower than expected US CPI

● BTC regained its top spot in terms of volume traded

● Bias towards buying across all regions, led by EMEA, banks and funds

● Merge and potential fork continue to influence ETH outlook

● Market will focus this week on FOMC minutes, UK and EUR inflation numbers

This past week saw both of the majors undergo strong moves higher, albeit with ETH continuing to handily outperform its peer BTC. Despite what looked like a choppy week at times, BTC was able to reclaim the $24,000 level by week’s end, while ETH rocketed high enough to briefly clear $2,000, before dropping back down into the $1,930-$1,950 range. The market was buoyed by last week's CPI print of 8.5%, which came in lower than expected and as such was interpreted as a potential signal that inflation is beginning to slow down.

This week's flow shows buying from all regions once again, with EMEA having another week of outsized buying. Looking at specific coins, trading has been relatively balanced, with DOT seeing particularly strong buying, while DOGE, AVAX, and EOS were heavily sold. Notably, BTC has reclaimed the top spot in terms of volumes traded from ETH, with both of the majors seeing a balance between buying and selling. Finally, while our crypto exchange clients had a slight sell side bias, banks and funds were heavily buying over the past week.

Similar to last week, the BTC futures basis showed little movement, or signs of life, while the ETH basis moved farther into negative territory around the preliminary merge date due to the potential for an ETH fork. The BTC 1 month futures basis is nearly unchanged, moving from 3% to 2.7%, with the 3 month basis performing similarly, dropping from 3% to 2.3%. In stark contrast, the ETH 3 month basis is down to -6.3%, from -4.5%, while briefly getting down as low as -8.7%, while the 1 month dove from -3.4% to -8%.

Crypto options have not been particularly interesting as of late, especially when compared to what's happening in crypto futures, and this week continues that trend. Across all tenors BTC and ETH ATM vols underwent fairly similar moves over the past week. In BTC, 3 month ATM vols are down from 71.4% to 68.6%, after experiencing a mid week spike up to around 73.2%. Likewise, in ETH we see 3 month vols having come off the 103% level to 97%, after getting as high as 105% mid-week. It’s interesting to see this 3 month tenor vol change mirrored across both coins, as that tenor encompasses ETH’s highly idiosyncratic merge event risk. 25 delta skew tells a similar story, as BTC 3 month skew has come off from 5% for puts down to 4.1%, while ETH’s 3 month skew started the week at 5.1% and finished at 2.9%. It’s clear that crypto's strong week has reignited some positive sentiment around the market as skew moves towards calls, particularly in ETH where playing the merge could provide a bullish catalyst as the date approaches.

Looking forward

Following the US CPI print potentially cooling off inflation expectations, the key events to watch for this week will be the release of UK and EUR inflation numbers. If this data were to come in lower than expected it would lend some credence to the idea that the recent US CPI print portends a potential shift in the economic environment with respect to global inflation. Additionally, the FOMC minutes out this week will provide much needed color on the Fed’s outlook, as well as clues to what the central bank may have in store going forward.

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